Which of the following is an accurate description of bounded rationality?

Question

BlackTom AI · Accepted Answer

First, let's restate the question and options to ensure clarity about what we're evaluating.
Question: Which of the following is an accurate description of bounded rationality?
Options:
- A) Human decision making is not rational
- B) Human decision making is rational but it ignores base rates
- C) Human decision making is rational but subject to cognitive limitations
- D) Human decision making is rational but prefers to avoid losses

Now, evaluate each option in turn.
Option A: 'Human decision making is not rational.' This contradicts the core concept of bounded rationality, which acknowledges rationality in humans but with limits. Saying it is not rational is overly absolutist and ignores the bounded aspect, so this is incorrect.
Option B: 'Human decision making is rational but it ignores base rates.' While some heuristics can lead to base-rate neglect, bounded rationality does not claim that decision makers systematically ignore base rates in all cases; it emphasizes cognitive limits and satisficing rather than perfect rationality. This description is too narrow and partly inaccurate in framing the theory, so this is not the best fit.
Option C: 'Human decision making is rational but subject to cognitive limitations.' This aligns precisely with the standard definition of bounded rationality, which holds that people aim for rational outcomes but are constrained by limited information, finite time, and limited cognitive processing, leading to satisficing rather than optimizing. This is the most accurate description.
Option D: 'Human decision making is rational but prefers to avoid losses.' This emphasizes loss aversion or risk preferences, which is related to prospect theory and behavioral economics, but it doesn't capture the core bounded rationality idea about cognitive limits. It describes a specific bias rather than the general bounded rationality framework. Hence, it is not the best description.

In summary, Option C correctly captures the essence of bounded rationality by acknowledging rational goals while recognizing cognitive constraints that shape the decision process, producing satisficing rather than perfect optimization. The other options either claim outright non-rationality, mischaracterize the role of base rates, or conflate bounded rationality with other specific biases without addressing the fundamental notion of cognitive limits.

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Which of the following is an accurate description of bounded rationality?

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